The Hindu Business Line : Global funds eye mid-cap textile companies

Also, a number of domestic companies have started tapping the global markets, both for access to cheaper capital and for increased visibility in these markets.

The last few months have seen a spurt in flow of global funds into largely medium-sized textile companies.

For instance, Citigroup has made an open offer for picking up a 20 per cent stake in textiles firm JBF Industries. Earlier, Citigroup had picked up a seven per cent stake in Ludhiana-based terry towel major Abhishek Industries Ltd; while Temasek, the Singapore-based private equity fund, bought out a 14 per cent stake in another terry towel major Welspun India.

Conversely, domestic textile firms have joined the IT and telecommunications bandwagon in the rush to access overseas capital.

Arvind Mills, for instance, is planning to issue Global Depository Receipts and related securities to raise equity of around $30 million and has sought shareholders' approval to issue up to 14 million GDRs, according to textile sector analysts.

Other firms that have tapped foreign markets include Alok Industries Ltd, which has also raised around $60 million in foreign debt, and Aarvee Denims and Exports, which has raised $7 million from German fund Deutsche Investitions-und Entwicklungsgesllschaft mbH.

According to industry players, nearly all the companies plan to use the funds raised from the foreign investors or from the global markets for financing their expansion plans in light of increased orders from foreign buyers. Several of the players also plan to vertically and horizontally diversify through the textile value chain in a bid to achieve economies of scale and shore up margins in an increasingly competitive global textile market.

Analysts predict increased investment activity in the Indian textile companies following the restrictions on Chinese textile exports by the US and the EU.

According to industry analysts, investment to the tune of $15 billion is needed to reach the $30-billion exports target set for the textile sector over the next five years.

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